Abu Dhabi Islamic Bank Eyes Sukuk Sale

Abu Dhabi Islamic Bank is planning to boost its capital through the sale of a sharia-compliant debt instrument, in what would be a rare method by a regional lender to boost its core capital ratios.

ADIB, the largest sharia-compliant lender by market value in Abu Dhabi, will start investor meetings on October 31 ahead of a potential Islamic bond, or Sukuk, sale, a statement from the arranging banks said on Tuesday.

The sukuk sale is likely to be benchmark-sized, a source at one of the arranging banks said. Benchmark size bonds are typically $500 million or more in size.

The bank has mandated HSBC Holdings, Morgan Stanley Inc, National Bank of Abu Dhabi, Standard Chartered Plc and itself to arrange the roadshows, with a potential sale of a tier one perpetual dollar-denominated sukuk to follow, subject to market conditions.

Tier one capital is a key measure of a bank’s financial strength. ADIB had a tier one ratio of 13.45 per cent at the end of June 2012, and said in its second quarter results that it aims to improve this to above 15 per cent in the near term.

The public sale of a debt instrument to raise tier one capital is extremely rare in the Middle East. Lenders including Commercial Bank of Qatar, Burgan Bank and Saudi Hollandi Bank have sold tier two instruments in recent years.

ADIB issued a $2 billion tier one Sukuk instrument in 2009 to the Abu Dhabi government as part of a wider scheme by the authorities to bolster the country’s banking system in response to the global financial crisis.

Shareholders approved the issuance of tier one sukuk worth up to $2 billion, the bank said in a bourse filing last week.

ADIB has warned in its last two quarterly results that global economic uncertainty and slow loan growth in the United Arab Emirates would affect earnings this year. It reported a three per cent rise in third-quarter profit earlier this month.